We want our money back too! That was the cry this week from thousands of British citizens with money tied up in the Guernsey arm of one of Iceland's collapsed banks, many of whom are desperately worried about losing the bulk of their life savings.

Last Saturday, Guardian Money carried a report about the "forgotten" Brits who face losing some or all of their nest-egg cash following the collapse of Iceland's biggest bank, Kaupthing. They have their money in the bank's Isle of Man arm, and are anxiously waiting to see how much of it they are going to get back.

Our report prompted people with money in the Guernsey subsidiary of another fallen Icelandic bank, Landsbanki, to contact us to say that they too had been left high and dry, despite the British government's pledge that no UK saver would lose money as a result of Iceland's financial meltdown.

They include Daniel Herzberg, a London-born teacher now living in Spain with his wife Lucy Kinnison and young son Oliver. They fear they could lose most of the five-figure sum they have invested in a Landsbanki Guernsey account.

Landsbanki Guernsey was placed in administration on October 7, and last week its account-holders were told they could expect 30p back for every pound they had invested, with only a hope of more to come.

The UK Treasury said this month that "all retail depositors in the Icelandic banks of Landsbanki (including their Icesave products), Heritable, and Kaupthing Singer and Friedlander (including their Edge products) will receive their money in full". However, Landsbanki Guernsey customers have discovered that this promise does not apply to them.

Savers with offshore funds are not protected by the UK's Financial Services Compensation Scheme, and Guernsey does not have its own scheme. It is now looking at setting one up, but this will be too late for Landsbanki's customers. Iceland's compensation scheme does not cover them either.

Landsbanki's Guernsey arm looks after more than 2,000 savings accounts holding a total of £121m. Many of those affected put their money into Cheshire Building Society's offshore division, Cheshire Guernsey. This was acquired by the Icelandic bank two years ago, and its name changed.

Herzberg says that when Cheshire Guernsey was taken over, "we carefully read the literature regarding Landsbanki and were reassured that our savings would be safe. How wrong we were!" The 39-year-old helped set up an action group and website (iwantmymoneylandsbanki.com) to draw attention to their plight.

Herzberg, his wife and Oliver, now two-and-a-half, have been living near Girona on Spain's Costa Brava for about four years. The couple are both teachers by profession; she teaches geography at a local secondary school, while he runs a cycling and walking holiday company. Both have family in the UK.

They opened a joint account with Cheshire Guernsey four years ago, and have since been building up a nest-egg for their future. "We are not risk-takers. We put our money into what we were told was a reputable A-plus rated bank with a parental guarantee," Herzberg says. Commenting on the proposal to give depositors back 30p in the pound, he says: "Anything under 100% is not acceptable. Our demand is our money back."

Other victims of the bank's collapse include Sue D'Arcy and Kenny Kinnaird, who lived in Banstead, Surrey, before retiring to Spain. "We worked all our lives in the UK and paid UK taxes for 40 years," D'Arcy says. They also have a five-figure sum in their account.

"My husband receives a civil service pension on which he has to pay UK tax. He served 30 years as a prison officer. His gratuity at the end of his 30 years' service was placed in a savings account with Landsbanki Guernsey. We couldn't open a savings account in the UK as at the time of retiring we were moving to Spain and had no UK address. In his career with the Home Office he was responsible for some of the most undesirable people imaginable. Was it worth it?"

With regards to the rest of the money savers are owed, the message from the administrators seems to be: don't hold your breath. "Further interim payments ... in part settlement of the remaining 70p in the pound due to depositors will be paid as sufficient realisations are achieved. This is expected to take some time," they say.

Meanwhile, it emerged this week that the Kaupthing Isle of Man savers might now have a better chance of seeing some compensation cash. The island's depositor protection scheme recently upped its maximum payout to £50,000 per person, but concern has been expressed about whether it will be able to cope.

The island's government is now set to pay up to £150m into the scheme in order to strengthen it, and this may mean more money is available earlier to compensate people. For more information, go to the Kaupthing Isle of Man savers' action group website: ksfiomdepositors.com

About this article

We slipped through the safety net too

This article appeared on p7 of the Money section of the Guardian
on Friday 24 October 2008.
It was published on
the Guardian website
at 19.01 EDT on Friday 24 October 2008.
It was last modified at 19.07 EDT on Friday 24 October 2008.
It was first published at 19.07 EDT on Friday 24 October 2008.